OUTLOOK

Masters of the mix

In BPO, companies that are attentive to transition issues and supporting the retained workforce can drive topline benefits from a more effective functional organization.

Overview

Imagine your chagrin: You bought a sophisticated new audio system for your home, and all the electronics retailer did was deliver it, plug it in and leave.

Given what you had hoped the system would provide—to say nothing of what you paid for it—you had assumed that an expert would help you set up the equipment and explain how to position the components properly for an optimal experience, how to operate the system, how to troubleshoot problems and so forth. After all, the system is meant to change the way you listen to music, and if the retailer fails to help you achieve that change, it’s unlikely you will understand the system or use even a small percentage of its overall functionality.

In much the same way, today’s buyers of outsourcing services have expectations for their BPO partners and suppliers that go well beyond just setting up the function or process and meeting basic service levels. They expect the BPO relationship to deliver better overall performance and positive strategic outcomes.

Wide-ranging change

What are the critical components of high-performance BPO? One of the more striking findings from Accenture’s researchis that the most successful BPO relationships—those that produce the greatest business value—are founded on the skills of the provider to manage the wide-ranging human and structural effects of BPO on the organization as a whole. To manage both the music system and the music, as it were.

This covers a lot of territory: managing organizational change effectively both through the short-term transition to outsourcing and over the course of the longer change journey; helping people from both the retained and outsourced workforces understand the impact of the structural and performance changes caused by BPO; communicating broadly and powerfully to all affected parties; and, finally, being attentive to using change in a positive manner to improve the impacts of the BPO relationship over time.

Nearly 90 percent of companies involved in a high-performance BPO relationship regard change management as an important capability; by contrast, only 62 percent of typical performers share that attitude.

Yet BPO clients also know that, ultimately, it’s about execution, not just good intentions: 77 percent of high performers characterize themselves as successful at executing change management plans, something claimed by just 34 percent of typical performers

So what’s change management all about in a BPO context?

First, it’s about managing both the short-term and long-terms effects of change. Effective BPO relationships are attentive to the organizational challenges encountered during the initial transition period and are good at optimizing the performance of both the outsourced organization and the retained workforce—that is, the employees who transition to the provider and those who remain with the client.

Second, successful BPO relationships are characterized by the highly skilled management of the longer-term change effort, striving for greater business impacts over the course of the longer BPO journey and becoming more “change capable”—more adaptive and agile in the face of new business demands.

The transition: A solid methodology

According to our research, a BPO provider’s experience, backed by proven transition methodologies, is critical to effective change management. A global procurement process manager for a fragrance and flavors company made this point directly: “During implementation, the first element we have really benefited from is our service provider’s methodology for doing the transfer. We have people from our provider who had experience with this type of project before. They came with a solid methodology for planning and managing the project.”

Long-term journey, long-term value

High-performance BPO arrangements are dynamic both in their goals and in how they are managed. They constantly seek to align their work with the wider needs and aspirations of the client’s business. Leaders from both client and provider find ways to leverage their management structures, processes and relationships to deal with this dynamism.

According to our research, nearly 85 percent of high-performance BPO relationships proactively refine their objectives as the work proceeds, compared with just 40 percent of typical performers.

This means that the most successful BPO relationships are attentive to managing the longer-term journey of change, often over the course of a multiyear contract. They also know how to manage multiple streams of work and multiple portfolios of change—a balancing act that is increasingly a characteristic of today’s business environment.

At Microsoft, for example, which has successfully delivered a long-term, transformational outsourcing program in finance and accounting, the company and its supplier created a dedicated change management/portfolio management program to ensure the success of more than 200 events associated with the development of the outsourcing program.

A combined client-provider team created global, functional and subsidiary-specific communication plans to engage with the various audiences affected by the change.

Local leaders were assigned the responsibility of managing the readiness of Microsoft’s people, which signaled to the subsidiary that change was close to home. Assigning subsidiary leaders to the team also gave people within the subsidiaries confidence that one of their own—rather than someone flown in from headquarters—was providing input and direction to the solution.

As this example suggests, it is important to bear in mind the difference between managing a short-term change program (such as the initial transition capabilities already discussed) and the longer-term journey of an outsourcing relationship.

Because they are so collaborative at the core, high-performance BPO relationships often enjoy an advantage in this area. When the client involves the provider in strategic discussions, the two can work together to more effectively identify risks and avoid problems. Different stakeholders may have contrasting views of business drivers and all will face different pressures. It is important to reach consensus on approaches and to understand the exact nature of shared problems and challenges. Failure to achieve common resolve can put the overall BPO change journey off course downstream.

A vision for the future: Managing opportunities

Managing for the long term is also about managing opportunities, however, not just avoiding risks. This is another characteristic of effective BPO relationships. Both client and provider look for opportunities to broaden the impact of the arrangement. They work together to define a compelling vision for the future, identify where the gaps are and then create a longer-term roadmap to realize the opportunities.

The vice president of operations for a high-tech manufacturer that has outsourced its procurement function described an emerging practice that has helped the company drive toward longer-term value. According to the executive, “The provider regularly sends their category managers to interview our major stakeholders at the vice president level. The stakeholders talk about projects coming up for the year ahead and what services they will be needing. That heads–up allows the provider’s team to go back and say, ‘All right, there’s a big project coming up at one of the facilities. We need to have an expert go out and talk to the client VP of facilities to understand their needs.’ ”

Putting processes in place to assess progress along the journey is also important. Of course, every outsourcing program has a project or program management office tasked with monitoring and reporting.

However, as individual projects get rolled up into a larger portfolio of programs over the course of the BPO relationship, it becomes more challenging to track, measure and manage the integration points. A key to successful management, therefore, is moving beyond traditional project management so that multiple strands of work can be coordinated effectively.

For example, an ongoing steering committee (which some call a “Journey Management Office”) can check the progress of multiple parts of the overall change portfolio as well as the impact each part has on the others. The Journey Management Office assesses the status of the journey against previously defined end-state targets and periodically reassesses those targets in light of market shifts and changing business priorities. It also monitors business outcomes, not just the achievement of intermediate project goals. This can keep the program on track through leadership shifts and marketplace change.

Added up, these attitudes and behaviors create a BPO relationship that is more change capable—a more agile organization that recognizes change as a constant presence and actively seeks it out rather than avoiding it.

Conclusion

The benefits of effective change management in BPO are measured at both an individual and organizational level. Companies that are attentive to transition issues and to supporting the retained workforce can drive topline benefits from a more effective functional organization—whether that is HR, finance, IT, procurement or something else. Then, that functional organization can continue to drive measurable improvements in business value, whether that is defined by sales, cost, productivity, retention or other significant metrics.

It’s a little like that home audio system—which, if carefully installed and periodically updated as the technology evolves, will provide years of satisfaction.

Change management and BPO: A research perspective

Accenture’s high-performance BPO research was based on a quantitative survey of 263 buyer executives, in-depth interviews, and input from more than 250 academic research studies.

Among the findings: The gap between BPO high performers and typical performers is large when it comes to executing a robust change management program. More than three-quarters (77 percent) of high performers characterize themselves as successful at executing change management plans—43 percentage points higher than typical performers. (Back to story)

Why diamonds are a BPO relationship’s best friendMany companies with world-class outsourced business services have radically redesigned their retained organizations. One common approach identified from our research is changing the retained organization from a “pyramid” to a “diamond” model.

With a pyramid structure, most employees reside at the bottom of the pyramid. Such a structure is not without its benefits. For example, employees continually build valuable, client-specific experience as they are promoted higher up the pyramid.

However, the cost of expertise in the pyramid model is high because it is applied only internally. By contrast, a provider can spread experts—and the cost of those experts—across multiple clients.

Diamond-shaped retained organizations replace the heavy bottom of the pyramid with BPO providers. Many transactional activities that were once performed by employees are now performed by providers, typically in a lower-cost location. There are fewer middle managers but more subject-matter experts and project leads.

The benefits of the diamond-shaped retained organization are reduced costs, access to BPO providers with best-of-breed skills, and greater flexibility because providers can more easily adapt to increases or decreases in service volumes. (Back to story)

About the Authors

Michael J. Salvino is the group chief executive of Accenture’s Business Process Outsourcing growth platform. He is based in Charlotte, NC.

Walter G. Gossage is the managing director responsible for change management offerings and capabilities within Accenture Talent & Organization. He is based in Dallas.

Mary Lacity is Curators’ Professor of information systems at the University of Missouri-St. Louis.

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